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Collaboration – the cornerstone of integrated business planning

Feb. 2 2016 by Gary Simon , Chief Executive of FSN & Leader of the Modern Finance Forum for CFOs - FSN Publishing Limited

Performance Management Budgeting & Planning

Tagetik CPM software for Integrated Business Planning

Enterprise planning is a curious mixture of art and science. The art is in exploiting corporate knowledge and insights to produce an accurate plan, budget or forecast and the science is vested in the mechanics of collecting, summarising and flexing the data and assumptions. Straddling these two ‘worlds’ is the formal and informal communications that often dictate the speed of the process, the responsiveness of the organisation in the face of volatile markets and the ‘richness’ of the forecast. Yet for many organisations collaboration remains elusive. So why is collaboration important and how can it be improved to yield a truly ‘integrated’ planning process?

The case for collaboration

Historically, many organisations have built up their budgets and plans along functional lines – simply because that is the way that people are usually organised. But business processes, especially integrated planning do not respect functional boundaries. Take for example, the ‘Quote-to-Cash’ cycle. It embraces inventory management, the sales department, the logistics and finance functions. The true costs of sourcing a product, delivering it to a customer and getting paid are driven by the process – not by functions. This means that budgets in one area need to be consistent with budgets in another if resources are to be allocated efficiently and setting a performance objective in one place does not have unforeseen consequences in another.

For example, a sales demand plan can only be executed efficiently if matched to supply and finance. An overambitious sales plan, which exceeds the ability of an organisation to supply or manufacture finished goods, may lead to excessive costs, as the organisation seeks to replenish stock from alternative suppliers or unplanned production runs. This, in turn, may deny other projects the working capital they need. Similarly, a revenue plan in a professional services organisation, such as a law firm, has to be consistent with an HR plan, in order to ensure that there are sufficient fee-earners available to produce the projected billable hours.

Integrated business planning recognises the pivotal importance of these interrelationships and more importantly the collaboration and the dialogue between all critical functions in the setting of an enterprise-wide plan.  

Process and technology support for collaboration

Collaboration in business planning is far more than the sum of the parts. The true value of collaboration comes from harvesting the different perspectives, ideas, experience and know-how of functional experts from across the business. It’s a process of challenge and negotiation that adds considerably to the quality of the plans, since it represents the combined wisdom of all of the participants.  

But this requires two actions from management:  the first is to ensure that all relevant information (metadata, i.e. structural information such as the organisational hierarchy, account structure, time periods) is consistent between users, and the second is that it is visible to all of the parties involved, in a manner that is sympathetic to their skills, functional area and role. Both of these pre-requisites rule out spreadsheets as a viable tool to support integrated planning. Successful and responsive integrated planning requires a centralised business planning model, such as Tagetik, that is accessible by all of the stakeholders to the plan - usually over the web.

In addition, integrated planning needs the support of workflow technology, which in recent years has replaced informal communication such as standalone email, telephone calls and ad-hoc meetings. Workflow technology offers the dual benefits of communicating information bi-directionally, and of integration with email.  This means that at every stage, relevant personnel can be alerted, key tasks can be tracked, actions prioritised and potential delays identified. The coupling of the process to the people charged with its smooth running allows all of the relevant functions to be aligned to the process, and empowers the people involved to collaborate up and down the organisation to make decisions and respond agilely to changing market conditions.

According to the PwC global finance benchmark report 2015, the rewards are high for organisations that invest in automation and process standardisation. The cost of finance as a percentage of revenue is 40% lower in top performing (top quartile) organisations, budgets are delivered 15 days faster than the average company and they spend 20% more time on analysis versus data gathering. Smart CFOs know that integrated planning is not merely a cultural issue – it needs modern enabling technology such as, Tagetik, as well.

Tagetik for unified budgeting, planning and forecasting

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